Wednesday, June 18, 2014

Asia Regulatory Review | 10 - 17 June 2014


ASIFMA Asia Regulatory Review



10 - 17 June 2014 | Issue 208
Spotlight
Kindly note the Asia Regulatory Review will take a summer break until the 15 July 2014.
Promoting Convergence and Investments in EU-Asian Financial Markets, co-organised by ASIFMA & CEPS on 18 - 20 June 2014.
ASIFMA comfort letter initiative to speed up HK deals
The Asia Securities Industry and Financial Markets Association (Asifma) is drafting an umbrella agreement to supplement Hong Kong's comfort letter standard. It is expected to speed up negotiations between underwriters and auditors. (IFLR)
The Monetary Authority of Singapore (MAS) announced that a facility for providing overnight Renminbi (RMB) liquidity to financial institutions in Singapore will be launched on 1 July 2014. MAS also welcomed the directive issued by the People's Bank of China (PBC) Nanjing branch that will allow eligible corporates and individuals in the Suzhou Industrial Park (SIP) to conduct cross-border RMB transactions with Singapore. These initiatives will further promote the international use of RMB and facilitate the growth of the RMB offshore market in Singapore.
Updates
CHINA
China beefs up financial support for trade
China's central bank called for more financing channels for the country's import and export businesses, in efforts to stabilize foreign trade. Commercial banks are urged to innovate their products and services, such as expanding borrowing to companies on export credit insurance, and more flexibility in lending to enterprises' short and medium-term capital needs, said the People's Bank of China (PBoC), the central bank. (Xinhua)
The central bank recently announced it would ease restrictions on cross-border use of the yuan to support trade and facilitate foreign companies' operations. The announcement, published on the central bank's website on June 11, says "banking financial institutions can conduct cross-border yuan settlement for individuals operating in goods and services trade businesses." (Caixin)
The Chinese government's selective reserve ratio cut went into effect Monday, with some nationwide banks also allowed to participate, as Beijing continues to try to target monetary easing without loosening conditions throughout the economy. Four market sources said China Minsheng Bank and Industrial Bank of China have been allowed by the People's Bank of China to cut their reserve requirement ratios by the 50 basis points enjoyed by rural and city commercial lenders. (MNI News)
PBOC extends access to its credit rating system
Three micro credit companies in Shanghai are among the first to receive access to the People's Bank of China's credit rating system, an important tool for them to review credit records of potential borrowers. Shanghai Changning Chang Cheng Micro-Loan Co, Jiading Jishiyu Micro-credit Co, and Zhabei Shibei Hi-tech Micro-Loan Co can now make credit history inquiries through the central bank's system. (Ecns)
CSRC issues rules for Shanghai-Hong Kong Stock Connect scheme | (Chinese Only)
Following a two week consultation period, the China Securities Regulatory Commission (CSRC) has issued the 'Provisions on the Mechanism of the Connection between the Shanghai and Hong Kong Stock Markets', which are intended to facilitate the launch of the Shanghai-Hong Kong Stock Connect pilot programme. There are no substantial changes from the consultation draft issued by the CSRC on 9 May 2014. Amongst others things, the rules:
- Set out the principle that trading and settlement activities must comply with the regulations and rules of the jurisdiction where such activities take place, and the relevant listed companies and brokers should be subject to the regulations/rules where they are listed or incorporated;
- Prescribe the duties and authorities of the Shanghai Stock Exchange (SSE), the Hong Kong Stock Exchange (HKSE), the securities trading service agencies and the securities clearing and depository institutions in both Shanghai and Hong Kong;
- Authorise the SSE and HKSE to suspend the programme under abnormal circumstances; and
- Clarify the settlement procedures between the Shanghai and Hong Kong clearing and depositary institutions.
- The rules became effective immediately
Policy fears mount as FX reserves increase
China's rapid accumulation of foreign exchange reserves is leading to difficulties in steering economic policy, analysts and officials with the foreign exchange regulator said on Thursday.
The nation will keep reserves at a "reasonable" level, officials of the State Administration of Foreign Exchange said in an online interview. (Ecns)
China, Britain to ink deals during Premier Li's visit
Chinese Premier Li Keqiang's upcoming visit to Britain will result in a number of bilateral deals regarding energy, automobile and finance, said Chinese Vice Minister of Commerce Gao Yan here on Thursday. Gao told a press briefing the deals include both inter-governmental agreements and business contracts. Li will attend the annual meeting of Chinese premier and British prime minister and conduct official visits to Britain and Greece from June 16 to 21. (Xinhua)
HONG KONG
The Securities and Futures Commission (SFC) and the Securities Commission Malaysia (SC) today jointly organised a seminar in Hong Kong to explore the potential of Hong Kong as an Islamic fund platform. In her opening remarks, the SFC's Deputy Chief Executive Officer and Executive Director, Investment Products, International and China, Mrs Alexa Lam, said Hong Kong is keen to further develop its Islamic finance market.
SINGAPORE
China, Singapore vow to further deepen cooperation
Chinese State Councilor Yang Jiechi on Thursday met with Singaporean Minister for Foreign Affairs and Law K. Shanmugam, vowing to further strengthen bilateral ties. Highlighting the good momentum of China-Singapore ties and mutually beneficial cooperation in various fields, Yang said China would like to boost exchanges with Singapore at all levels. China will work with Singapore to promote the healthy development of China-ASEAN ties and contribute to regional peace and stability, said Yang. (Xinhua)
The Republic will implement all the provisions of the World Trade Organization's Agreement on Trade Facilitation once it comes into force, which is expected to be by July 31, 2015, says the Ministry of Trade and Industry. (Channel News Asia)
INDIA
Narendra Modi to Visit Japan in Early July
Indian sources are reporting that Indian Prime Minister Narendra Modi will visit Japan in the first week of July. According to the Indian Express, Modi will head to Japan following his first bilateral overseas visit, a trip to Bhutan. India and Japan have held annual prime ministerial summits since declaring a Strategic Global Partnership in 2006. Japanese Prime Minister Shinzo Abe most recently visited New Delhi as the chief guest at India's Republic Day celebrations in January 2014. (The Diplomat)
The Reserve Bank of India has finalised banks' liquidity coverage ratio plan and told them to keep 60% coverage from January 2015 and raise the level to 100% in phases. (Economic Times)
The Financial Sector Legislative Reforms Committee (FSLRC) Report is one of the most important, well researched, as well as well-publicized reports in Indian financial history. It not only lays out the functions of the financial sector and how it should be structured, but also how legislation and regulation governing it ought to look like. The authors of this report truly have to be commended for their national service. The report's influence will be felt for many years to come.
The Reserve Bank of India (RBI) issued a circular dated April 03, 2014 regarding harmonization of KYC norms for FPIs. In the light of the circular, it was decided:
- The DDPs are advised to share the relevant KYC documents with the banks concerned based on written authorization from the FPIs.
- Accordingly, a set of hard copies of the relevant KYC documents furnished by the FPIs to DDPs may be transferred to the concerned bank through their authorised representative.
- While transferring such documents, DDPs shall certify that the documents have been duly verified with the original or notarised documents have been obtained, where applicable. In this regard, a proper record of transfer of documents, both at the level of the DDP as well as at the bank, under signatures of the officials of the transferor and transferee entities, may be kept.
Prime Minister Narendra Modi has warned of tough measures to repair the economy. There is no denying that restoring the economy would require some unpopular decisions, but the tough talk could also be a calibrated move to tone down expectations. The measures may also include an attempt spruce up the Railways, which has been ailing due to populist steps taken by previous railway ministers. ET looks at some possibilities (Economic Times)
JAPAN
The government of Prime Minister Shinzo Abe on Monday unveiled policy steps aimed at ensuring growth in the face of demographic challenges, including the increased use of foreign workers and eased labor rules for white-collar employees. (WSJ)
Japanese Prime Minister Shinzo Abe's latest growth strategy is coming into view weeks before its formal unveiling, with a mixed bag that includes a corporate tax cut and a retreat from an agriculture overhaul. Mr. Abe said Friday that the government has decided to reduce the corporate-tax rate below 30% in several years' time, down from around 35% now. The government agreed to find offsetting revenue but put off a detailed plan until the end of the year. (WSJ)
Bank of Japan Raises View on Overseas Economies
The Bank of Japan raised its view on overseas economies Friday, setting the stage for a future pickup in exports that the central bank has long hoped for to make the country's economic recovery sustainable. As was widely expected, the BOJ also decided unanimously to continue its easing campaign of increasing the country's monetary base at an annual pace of 60 trillion Yen to 70 trillion Yen ($590 billion to $690 billion) to stamp out deflation. (WSJ)
Japan's government is readying to unfetter its huge public pension fund, freeing managers to dump low-yield sovereign bonds and go in search of higher, but riskier returns, in a move that could see cash flood global markets. (Channel News Asia)
AUSTRALIA
The Board decided to leave the cash rate unchanged at 2.5 per cent.
MALAYSIA
The Government has announced further liberalisation measures to strengthen the economy and promote investment. This includes lifting the barrier on new foreign unit trust management companies entering Malaysia. This new measure, to take effect immediately, is aimed at making a wider range of competitive products available to investors and increasing competition in the sector. (The Star)
Bursa Malaysia Bhd plans to introduce more sophisticated investment products, as it steps up efforts to lure investors to the local stock exchange. Among the initiatives taken to broaden the bourse's appeal is the establishment of a Bursa Malaysia-centric Environmental, Social and Governance (ESG) Index. This, according to Bursa, will strengthen its position as a leading exchange in the region. (The Star)
CYBERSECURITY
U.S. telecom chief tells industry to lead on cybersecurity
The top U.S. telecom regulator on Thursday told communications companies to take the lead in fortifying their networks against cyberattacks, saying they can do more to bolster security short of new government regulations. In his first major speech devoted fully to cybersecurity, Federal Communications Commission Chairman Tom Wheeler urged the private sector to "step up to assume new responsibility and market accountability for managing cyber risks" before the FCC weighs a regulatory approach to the problem. (Reuters)
INTERNATIONAL
International housing bubble is forming, IMF warns
The American housing market is frothy with some already seeing signs of a legitimate bubble, and now the International Monetary Fund is raising the alarm about housing markets in developed countries. (Housing Wire)
IOSCO Intensifies work on Market-Based Finance
The Board of the International Organization of Securities Commissions (IOSCO) met in Madrid this week to drive forward IOSCO's work on market-based finance. Chairman Greg Medcraft said 'Capital markets are emerging as a key source of the finance needed across the globe to drive economic growth. Through a work agenda focused on fostering markets as a trusted source of capital, IOSCO is playing an important role in supporting that growth.'
Clock ticking to resolve third country CCP rules
Regulators are running out of time to agree on cross-border rules for listed and OTC derivatives clearing and risk damaging Europe's financial markets, according to panelists at the International Derivatives Expo (IDX) 2014. (The Trade)
UNITED STATES
The International Monetary Fund (IMF) has slashed its US growth forecast, urged policy makers to keep interest rates low and raise the minimum wage to strengthen its recovery. The crisis lender said it expects 2% growth this year, down from its April forecast of 2.8%, after a "harsh winter" led to a weak first quarter. (BBC)
The Federal Reserve Board invites comment on proposal to modify regulations for capital planning and stress testing
The proposed rule would shift the start date of the capital plan and stress test cycles from October 1 of a calendar year to January 1 of the following calendar year. Under the proposed rule, a bank holding company with total consolidated assets of $50 billion or more would be required to submit its capital plan and stress test results to the Federal Reserve by April 5, three months later than under the current rulemakings.
EUROPE
The European Securities and Markets Authority (ESMA) has published a report on the application of accounting requirements for business combinations in IFRS financial statements. The report, based on a review of the annual IFRS financial statements of 56 issuers in the European Union (EU), examines the consistency of how key requirements of IFRS 3 - Business Combinations are applied and provides recommendations to issuers, and suggestions to the IASB, on areas where the usefulness and quality of the financial information could be improved.
The report provides an overview of ESMA's activities in 2013 as the European Union's securities market regulator, focusing on its tasks and achievements and setting out the Work Programme for 2014.
Bank Recovery and Resolution Directive published in Official Journal
The Directive provides national authorities with tools to pre-empt bank crises by introducing instruments at preparatory and preventative, early intervention and resolution stages of bank failure. Member States have until 31 December 2014 to transpose the Directive into national law.
The UK Government announces review of wholesale financial market
The government is today announcing further steps to raise standards of conduct in the financial system with a joint review by the Treasury, the Bank of England and the Financial Conduct Authority (FCA) into the way wholesale financial markets operate. Strong and successful financial services that set the highest standards are an essential part of building a resilient economy. The government will consult on these steps in the Autumn. The Review will run for 12 months.
UK plans to make currency-rigging a crime but rejects EU rules
British finance Minister George Osborne rejected European Union plans to outlaw currency market manipulation on Thursday and instead set out his own proposals to make rigging exchange rates a criminal offence. EU laws taking effect in 2016 will make it a criminal offence with a four-year jail term to rig key prices in a wide range of financial markets. (Reuters)

EU threatens to cut financial services from trade deal
The EU is threatening to exclude banks, hedge funds, insurers and other financial companies from a trade deal with the US amid a fight with Washington over how to co-operate on regulation. Brussels and Washington are negotiating the terms of what would be the world's biggest regional trade agreement, covering almost half of global economic output and a third of world trade. With many transatlantic tariffs already low, the mooted pact's biggest goal is to lower regulatory and other non-tariff barriers to trade between the EU and US. (FT)

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Q1 2014 Quarterly Update - Asset Managers
Asian Liquidity Stress index
Approach to Rating Credit Card Receivables-Backed Securities
Australian Auto ABS and RMBS Performance
Australian Prime RMBS Arrears
Fitch

Operating Environment Poses Risks for ASEAN Bank Ratings
Expect More Basel III Tier 2 Issues from Thai Banks
China State-Owned Enterprises On Bumpy Path Towards Reform
Fitch Revises Outlooks on 8 Japanese Insurers, Aflac to Negative
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